Think long term so downturns don’t become death spirals

Uncle Henry had a heart attack and looked awful. To make things worse, the guy in the hospital bed next to him had just died, and he heard the footsteps of the orderlies coming for the body.

Dave Millhouser

Unk summoned his remaining strength and sat up in bed. Worried that he looked a bit like a corpse himself, he pointed to the dead man just to make sure they carted off the right guy.

The story has a happy ending. Unk married, had a child, lived into his late 80s and taught me lots of bad jokes.

We seem to be emerging from a downturn, but in the middle of bad times it’s hard to be certain whether we are in a business cycle or a death spiral.

As in Unk’s case, it’s important to note the difference (and to make sure your market knows you are viable).

When you’re in a death spiral, nothing will help (eight-track tape manufacturers take note). But when the business cycle reboots, how we behaved during the bottom of the cycle may determine whether we float when the economic tide comes back in.

One friend who sells used coaches has always responded to slow sales by getting on the phone. He calls everyone who ever heard of a bus, just letting his customers know he’s thinking of them.

He doesn’t pitch buses, but he reminds folks that he’s around if they need anything, sorta like Unk sitting up.

Some situations seem impossible. We can’t afford new buses because we have no business, and we have no business because our buses are old.

One friend made his coach appear new by taping over the manufacturing date on the builder’s plate. He got away with it because his equipment was well maintained.

Refurbishing may be an answer, or new graphics — anything to show signs of life and that you are committed to your clientele.

Business cycles can become death spirals when we take shortsighted measures that gut our ability to respond to an improving economic environment.

Years ago a large operator responded to a cash crunch by selling its newest coaches, figuring it could raise the same amount of money but sacrifice fewer revenue-producing buses.

At the same time the operator craftily reduced its maintenance budget. You can imagine what happened.

Unless you’re making buggy whips, it’s sensible to assume that the tide will turn, and you don’t want to cut out the people or parts of your business that will be useful when times get better.

If you are making buggy whips, you’re excused from the rest of this column.

In some cultures companies respond to bad times by unloading their highly paid employees. The problem is, assuming they weren’t top-heavy, those are the folks most qualified to help them survive then thrive.

Sometimes it works the other way. Following 9/11 the manufacturer I worked for quickly did a bunch of corporate streamlining, trimming production velocity and cutting people, inventory and wasteful operations.

It turned out builders knew that demand had dropped precipitously before the attack. They had been reluctant to cut back because they feared the industry would perceive them as being troubled.

The nature of the downturn gave cover for doing what was necessary (and already planned). The market was more understanding than it otherwise would have been.

The combination, in recent years, of an economic downturn accompanied by a regulatory tsunami has ganged up on us, and in my view has stifled our industry. That is a cycle, not a death spiral.

Both of these situations may be easing. As the economic tide begins to rise, those companies that have done the best job of managing near-term cash crises without squandering the resources necessary for long-term growth will do best.

The country really needs what we do, and will need more of it in the future.

If I’m right, and the business cycle is on the upswing, now is a good time to think about how to handle the next one. Those gritty folks who are making buggy whips or eight-track tapes don’t have to worry about cycles, but for the rest of you (who have survived this one) more are on the way.

If we understand our business and how it all fits together, we’re better able to act rationally in bad times. It’s easier to think all that through BEFORE we’re worried about making the next payroll.

Most companies have plans for dealing with accidents, why not one for the next downturn? Accidents may happen; economic cycles are certain.

Dave Millhouser is a bus-industry marketing consultant and freelance writer. Contact him by email at Davemillhouser@gmail.com.

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